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SCOTUS on Prop 8 and DOMA: The Financial Implications

Written by: MainStreet03/27/13 - 11:28 AM EDT

By Eric Reed

NEW YORK (MainStreet)--This week the Supreme Court will take up one of its most controversial issues since the Affordable Care Act: gay marriage. Today and Wednesday the Court will hear arguments in United States v. Windsor and Hollingsworth v. Perry cases which challenge the government's right to restrict marriage to straight people alone. And there are significant financial implications at stake--highlighted all the more at tax season.

Windsor addresses the Defense of Marriage Act, or "DOMA," an act of Congress which defines the institution as between a man and a woman for all purposes of federal law. It means, in essence, that regardless of a gay couple's status under state law, the couple can never be married in the eyes of the U.S. government.

Hollingsworth challenges Proposition 8, a 2008 referendum which amended the state constitution of California to ban gay marriage, which had recently been made legal statewide. Both cases have been victories for gay marriage proponents so far, with district and appellate courts overturning DOMA and Proposition 8 respectively.

If the Supreme Court upholds either or both of those rulings it would have a large impact on the American landscape. Upholding Windsor would mean that the federal government could no longer restrict its definition of marriage to heterosexuals, forcing it to recognize gay unions where legal.

A decision to uphold Hollingsworth could strike even more broadly, as the lower courts in that case have ruled that the government has no legitimate basis for drawing a line between homosexual and heterosexual couples at all. If the Supreme Court affirms this reasoning it will have effectively outlawed outlawing gay marriage the same way that it did interracial marriage in Loving v. Virginia. Considering that only nine states currently allow gay marriage, and 29 have amended their constitutions specifically to ban it, this would be a massive upheaval.

For gay couples everywhere, these cases will likely have a major impact on their wallets. Both federal and state governments award significant financial incentives to married couples, allowing them access to each other's resources, shared government benefits and often considerable tax breaks. Currently that entire system is largely reserved for heterosexuals; however, Windsor and Hollingsworth have the potential to change all that.